A Look at Section 1115 Medicaid Demonstration Waivers Under the ACA: A Focus on Childless Adults

Prior to the Affordable Care Act (ACA), adults without dependent children were excluded from Medicaid coverage, unless states used Section 1115 waivers to extend coverage to this population. Moreover, since the enactment of the ACA, additional states have obtained these waivers to get an early start on the ACA’s Medicaid expansion that will take effect in January 2014. This brief provides an overview of current Medicaid waivers that expand coverage to childless adults and implications for these waivers under the ACA. Key findings include:

One key reason states have obtained Section 1115 waivers to date is to expand coverage to childless adults. There are 24 states that provide coverage to adults without dependent children through waivers today.1 The waivers vary significantly across states in terms of eligibility levels, benefits, and cost sharing requirements. The ACA provides new state plan authority for states to expand Medicaid to nearly all non-elderly adults with incomes up to 138% FPL as of January 2014, and provides an enhanced 100% federal matching rate for newly eligible adults that will phase down to 90% over time. The ACA also provided states with a new state plan option to get an early start on the expansion, effective April 2010 to December 2013, at their regular federal Medicaid matching rates. Seven states (California, Connecticut, Colorado, the District of Columbia, Minnesota, New Jersey, and Washington) expanded Medicaid coverage to adults after the enactment of the ACA to prepare for 2014. Connecticut uses the ACA’s pre-2014 state plan option, while all of the other states use a waiver as a vehicle for all or some of their coverage expansion.

Most (18 of 24) states with waivers that cover childless adults are planning to transition this coverage by implementing the ACA’s 2014 coverage expansion. Many of these states will need to make changes in their existing waiver coverage to meet the rules of the 2014 expansion, such as eliminating enrollment caps, expanding benefits, and reducing cost sharing requirements. Six states with waivers for childless adults (Idaho, Indiana, Maine, Oklahoma, Utah, and Wisconsin) are not planning to implement the Medicaid expansion at this time, although CMS recently approved one-year waiver extensions in Indiana and Oklahoma. In states that do not implement the ACA’s 2014 Medicaid expansion through their state plans or a waiver extension, many adults covered by these waivers will likely lose coverage when the waivers expire at the end of 2013.

CMS has issued guidance related to the role of waivers in the 2014 Medicaid expansion, and several states are seeking waiver authority to implement the expansion in ways that differ from the new state plan authority. CMS has indicated that states cannot receive the enhanced 100% federal matching rate for partial expansions that do not extend up through 138% FPL (e.g., an expansion only to 100% FPL). However, CMS noted that it would consider section 1115 waivers for partial expansions at a state’s regular Medicaid matching rate. In addition, CMS has specified that it will consider approving a limited number of section 1115 waivers to allow states to implement the 2014 Medicaid expansion through a premium assistance model, in which the state would use Medicaid funds to purchase coverage for the expansion population in the new Health Insurance Marketplaces established by the ACA. CMS has also identified at least one federal Medicaid requirement that it will not waive, specifying that it will not approve enrollment caps for the newly eligible population.

A number of states have waivers pending or in development. As of September 2013, Wisconsin has a waiver proposal to implement a partial expansion (coverage for childless adults up to 100% FPL) at its regular Medicaid matching rate. In addition, Arkansas received waiver approval to implement the expansion using a Marketplace premium assistance model to purchase coverage in the Marketplaces. Iowa also has a waiver request pending that would provide coverage for the ACA Medicaid expansion population through existing Medicaid delivery systems (but with a monthly premium contribution) and by using premium assistance to purchase coverage in the Marketplaces for those with incomes over from 101-138 percent FPL. Pennsylvania has also released a waiver concept paper with broad changes as well as some premium assistance and Michigan enacted state legislation to implement the expansion which would require a waiver.

CMS has also issued guidance to promote several strategies to facilitate enrollment in the Medicaid expansion that would require waiver authority. These include early adoption of Modified Adjusted Gross Income (MAGI)-based rules, which has been approved for 12 states; extending the Medicaid renewal period so that renewals that would otherwise occur during the first quarter of calendar year 2014 occur later, which has been approved for 19 states; enrolling individuals into Medicaid based on Supplemental Nutrition Assistance Program eligibility, which has been approved in 4 states; enrolling parents in Medicaid based on children’s eligibility, which has been approved in 2 states, and adopting 12-month continuous eligibility for parents and other adults, which has not yet been adopted by any states.

Prior to the ACA, the only way to cover adults without dependent children and receive Medicaid matching funds was through a Section 1115 waiver. In providing coverage to those who would have otherwise been uninsured, CMS also has approved limits on this coverage such as limited benefits or enrollment caps. By expanding Medicaid coverage to childless adults through the ACA and providing states with significant amounts of federal funding to do so fundamentally changes the landscape. Given the ACA, the role and design of waivers for this population remains an open question. Which provisions of the Medicaid statute CMS will allow states to waive, how effective the ACA’s new waiver approval processes will be at obtaining public input on waiver changes, and what the implications will be for individuals, providers, plans, and states, all remain important issues to watch.